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What would be the expected return and standard deviation

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Reference no: EM132554204

Benjamin Tang currently has holdings in the following three companies:

                                                                                  E(R)               σ                          β

Vivian Tam & Yuanyuan Wang Technologies (X)                      14%         16%                  2.0

Vivien Wang & Danny Dong Ltd. (Y)                                      12%         14%                  1.6

Omar Salahuddin & Philip Viegas Inc. (Z)                                10%          11%                   1.2

Coefficient of Correlation                                                      ρxy = -0.4    ρxz = 0.6          ρyz = -0.7

Question a. What would be the expected return, standard deviation, and β for the following portfolios: Portfolio A $20,000 in X and $30,000 in Y? Portfolio B $35,000 in Y and $15,000 in Z? Which one is the better portfolio and why?

Question b. Assuming normal distribution, determine the range within which approximately 95% of the portfolio A's returns will fall?

Reference no: EM132554204

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